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How Much Does Small Business Insurance Cost?

2 business owners going over business insurance pricing

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Mandy Sleight
Updated October 23, 2022
6 Min Read

There are around 32 million small businesses in the United States. Although small in size, these businesses have similar needs to large corporations, including insurance. A solopreneur working from home on their computer has different coverage needs than a business owner with several employees, a physical office and a vehicle fleet. Understanding the factors that go into small business insurance premiums, the average costs, and ways to save can help you find the right policy at the right price.

What Factors that affect your business insurance costs

Although the factors that affect your business insurance costs can vary by policy type and insurance company, generally, there are a few criteria that go into determining your rate.


The industry or profession the business works in determines the risk, or exposure, of filing a claim. The higher-risk your industry, the more you can expect to pay for small business insurance. 

For instance, a home-based writer who works from their computer is a smaller risk to the insurance company than a tree trimmer driving to various locations in a company vehicle, using power tools and climbing 100-foot trees. 

While the writer may only need professional liability, or errors and omissions (E&O), insurance, the tree trimmer may need professional and general liability, workers compensation for their employees, and auto insurance for their company vehicles. 

Company size

The more employees you have, the more you risk filing a claim for an accident, injury, or incident involving a customer or client. A company with just one or no employees will generally pay less for small business insurance than a company with several employees.


The location of operations also factors into the cost of small business insurance. State laws may dictate how much coverage you are required to carry, especially when you purchase workers compensation or car insurance. If you work on state or federal contracts, you may have a large minimum coverage limit to meet to be in compliance and have your bid accepted.

With vehicle insurance, almost all states have minimum coverage type and limit requirements to meet. Premiums are usually higher in areas with more congestion and people, so expect to pay more in urban areas compared to rural areas.

Claims history

If you’ve never purchased small business insurance, you may have a clean claims history. But if you’ve filed business insurance claims previously, it can signal a red flag for risky business behaviors to the insurance company, which will have a negative effect on rates. 

Payroll and revenue

Certain small business insurance policies factor in annual payroll and revenue when calculating premiums. Workers’ compensation relies on annual payroll and the number of employees, for example. 

When buying general liability insurance, yearly revenue helps determine insurance costs. This coverage not only protects your business, it also protects your customers against injury and other risks. The more customers you have, the more at risk you are to file a claim.

Policy details

The policy details will also factor into how much you pay for small business insurance, including:

  • The type of policy
  • Coverage limits
  • Policy deductibles
  • Endorsements added

If you need auto insurance, a policy with full coverage will provide greater protection, but cost more than just liability coverage. Likewise, choosing an aggregate limit maximum of $2 million instead of $1 million on a general liability policy will increase your policy costs. Choosing higher deductibles can offset premium costs, but means you have to pay more out-of-pocket if you file a claim.

Average Small Business Costs 

The average costs for small business insurance can range from $40 to $275 or more per month. With such a wide range, we’ve broken down some of the policy types and average monthly costs for small business insurance.

Business owner’s policy (BOP)

A business owner’s policy, or BOP, combines several policies into one. The BOP provides coverage for business income, general liability, and commercial property insurance. Business property value, the company location, policy details, years in business, and other factors determine how much you’ll pay for BOP coverage.

The Hartford customers pay, on average, $3,125 for BOP coverage, or $261 per month. Insureon analyzed 28,000 small business insurance policies to provide averages, with a BOP policy costing around $99 per month. Progressive commercial customers pay an average cost of $101 monthly for business owner’s policy coverage.

General liability

A general liability policy, also called business liability insurance, will pay claims for bodily injury or property damage that your business or employees cause. Industry, location, claims history, payroll, and sales make up the premium for this policy type. 

At The Hartford, the average customer pays around $88 per month for coverage. The Insureon analysis shows a lower average monthly cost of $65 for business liability coverage. The Progressive average is the same as Insureon, costing $65 on average each month.

Professional liability (E&O)

If your business makes an error or omission when performing professional services, professional liability provides protection if you’re sued or someone files a claim. The industry, company size, years in business, location, and coverage limits determine the policy costs. 

The average monthly cost for professional liability insurance is $97, according to Insureon. At Progressive, customers pay an average of $56 for errors and omissions coverage. The Hartford did not provide an average for this policy type. Next Insurance offers E&O insurance beginning at $19 per month based on your risk profile.

Workers’ compensation

Workers’ compensation coverage pays your employees when they are recovering from a workplace injury or illness. The industry, payroll, and claims history determine insurance costs, which are calculated per $100 of payroll.

For payroll less than $300,000 per year, The Hartford customers pay an average of $70 per month. Insureon’s analyzed average is higher, at $111 per month, which is the same as the average Progressive customers’ pay for worker’s compensation coverage. Next Insurance reports 50% of their customers pay between $25 and $150 per month on workers’ comp insurance. Carpenters pay the most expensive premium ($230 per month) and E-commerce businesses pay the least expensive premiums ($22 per month).

How much should I budget for business insurance?

How much you should budget for business insurance depends on your company factors. The more employees and payroll you have, revenue you earn, and policy types you need, the more you should budget for small business insurance.

You can use the average business insurance costs above to provide a general idea of what you could pay for coverage. Overestimating your costs is better than underestimating how much you’ll pay, so it may be a good idea to budget more than you think you’ll need.

Once you have a policy in place, you’ll have a better idea of how much your business costs to insure. Then, you can work with your insurance agent or financial professional to forecast business insurance costs for the following year.

How do you calculate insurance for a business?

Unfortunately, there isn’t a master formula or calculator to calculate business insurance costs. Not only are there many factors that determine your premium, there are nuances for certain industries that make it hard to create a one-size-fits-all calculator to estimate insurance rates.

You also may not know what coverage types you need and what level of coverage is sufficient for your business risk. Working with a knowledgeable insurance agent or broker can help you calculate your coverage costs and provide quotes for the coverage you need.

How to lower your small business insurance cost

Although small business insurance costs can be expensive, they can be necessary and provide valuable protection. Here are some ways to lower the insurance costs for your small business:

  • Bundle policies. Just like with home and auto, you can usually save by bundling your business policies together with the same carrier. Some policies, like the BOP, already bundle necessary policies together for some professions.
  • Compare quotes. Once you know the policy types and coverage limits you need, get multiple quotes from different companies to compare rates. You can do this on your own or work with an insurance broker who can do it for you.
  • Pay premiums in full. While not everyone can afford to pay a lump sum for their coverage, the businesses that can will usually save on installment fees.
  • Commit to workplace safety. Providing formal safety training and sticking to routine maintenance can minimize your employees’ risk of getting hurt and the chances of having a customer file a claim against your business.
  • Increase deductibles. Raising your deductibles will keep premiums low. Just make sure you can afford to pay the higher deductible if you file a claim.
  • Only pay for the coverage you need. If you’re a solopreneur working from home, you probably don’t need general liability or workers’ comp. Working with an insurance agent can help you uncover what you need and avoid what you don’t.

Where can I purchase business insurance?

You can purchase business insurance online, over the phone, or in an office. You can choose to get small insurance online with companies like Next Insurance, which offers BOP, general liability, commercial property and auto insurance, tools and equipment, workers’ compensation, and E&O coverage.

You can work directly with an insurance agent for a company, such as Progressive or The Hartford. Or, you can work with an independent broker agency to purchase business insurance. The advantage of working with a broker rather than a direct agent is getting quotes from several companies, which can help you save money and dial in the exact coverage types and limits you need to protect your business.